How To Get Retention Bonuses

When To Keep A Card Open Or Close It

If you have been earning miles primarily from credit cards then you probably have come across this problem. You open a card, get the bonus, and then the 1 year anniversary comes and you don’t know what to do next…

The 1 year anniversary is significant for a couple of reasons:

Typically this is when the annual fee actually starts since many cards now waive the fee for the first year.

As an incentive to pay the annual fee, many cards now offer some sort of anniversary bonus. This can be anything from a free hotel night (Hyatt, Marriott), to a points rebate (Sapphire Preferred), or bonus points / miles (Southwest).

The obvious benefits of closing a card are that you avoid paying the annual fee but that can certainly negatively impact your credit score if you close too many cards in a short period of time.

Always Try To Retain Or Downgrade

My personal advice and strategy is to either try and get a retention bonus or downgrade to a free version of the card.

The rationale behind this is:

It’s Cheaper For Them To Keep You Than Lose You

The credit card company spend upwards of $700+ to acquire you as a customer (marketing to you, affiliate payouts, sign on bonus, setting up the account, etc). One Chase exec told me that it takes them on average 7 years to recoup their initial investment in acquiring you.

So if they spent $700+ to get you, it is way cheaper for them to waive the annual fee and lose $95 but keep you as a customer, instead of you closing the card and then them having to spend another $700+ to get someone else.

No Need To Burn Bridges

Fair warning, I have zero data to back this up but from my experiences it is always easier to get approved for cards if you are a current customer. I’ve had no luck getting any US Bank cards and I suspect it is because I don’t have a prior history with them.

Say for example your account doesn’t get automatically approved for a card and a credit risk analyst has to manually look over your application. What do you want them to see? That you previously had 4 cards with them but have closed every single one after 1 year OR you previously had 4 cards, closed 1 of them and downgraded the 3 others but those accounts are all still in good standing and still open for the last 4 years.

To me it just makes sense to avoid hurting your credit score by closing a card if it can be avoided. If the bank is giving you the option to keep the credit line open for free with a downgrade, why wouldn’t you do that? My sock drawer is literally filled with 10 – 20 downgraded versions of cards that are all still open but I have never put a charge on.

Keep It Or Close It? A New Show From HGTV

Over the past few months, quite a few of my cards “have come due” meaning that they have hit the 1 year anniversary mark and I have had to decide to keep or close them.

These decisions to downgrade or close my cards reflect my personal preference of avoiding paying annual fees. Don’t think of this as a definitive guide, more just me sharing my experiences. For some people, it might actually make sense to pay the annual fee if they are offered a large retention bonus or actually use the cards on a day to day basis!

American Express Platinum

Status: Closed

Retention Offer: No

Annual Fee: $450

When I first got this card in November of 2012, I grudgingly paid the $450 annual fee. The reason was because every calendar year, I could get $200 in airline gift certificates which I talked about here.

Since the annual fee is prorated at $37.50 a month, even after my 1 year anniversary in November 2013, I continued paying the annual fee for an extra 2 months. The reason for this was so that on Jan 1, 2014, I could get another $200 in airline credit. After I purchased my Southwest gift certificate and was reimbursed, I simply called and closed my card.

So for $450, I was able to get $200 in 2012, 2013, 2014 or basically $600. This does not include the $100 Global Entry reimbursement, lounge access, or 50,000 point sign up bonus that I also got.

So overall I paid around $500ish for $600 in airline gift certificates, 2 years of lounge access, free Global Entry, and 50,000 AMEX Points! Not terrible…

Unfortunately AMEX doesn’t offer any free versions of their “charge cards” which earn Membership Rewards, so you can’t really downgrade unless you want the Gold or Green Cards and pay a lower fee of $125 or $95.

Some people commented below that you could potentially downgrade to the AMEX Everyday Card which earns Membership Rewards and has no annual fee BUT that is a credit card and not a charge card.

American Express Premier Rewards Gold

The AMEX PRG card has one of the worst value propositions and is really hard to justify paying the annual fee.

Unless you pay out of pocket for revenue tickets, it is really hard to imagine the 3x airline ticket bonus covering the $175 annual fee.

I got this card last February for the 50,000 point sign up bonus and because the annual fee was waived for the 1st year.

I honestly wouldn’t even have ever even used it after I completed the minimum spend requirement but it turns out that “purchases” on Amazon Payments get coded as airfare. So “spending” $12,000 over the last 12 months has earned me an easy 36,000 points.

When I called to close the card, I was offered 5,000 points on the spot and an additional 15,000 points for spending $3,000 in 3 months. I took the offer for the time being but wasn’t sure if I was going to close the card.

This morning, I opted to close the card and logged into my AMEX account and noticed that the 15,000 retention bonus (for spending $3,000) already posted without me even spending a penny…

So I quickly transferred out the 15,000 Membership Rewards points to British Airways at 1:1 ratio (transfer was instant) and then called the close the card.

Again, I was told there was no way to downgrade to a free version because this card is a “charge card” and you can’t switch between charge card and credit card without opening a new account.

American Express Starwood Card

Status: Downgrade to Blue Cash Everyday

Retention Offer: $35 statement credit

Annual Fee: $65

I love SPG as a brand and they undoubtedly were the pioneers of creating an awesome loyalty program and credit card BUT Chase has really brought the heat and AMEX and SPG have not kept up.

The SPG card has no multiplier for non-hotel stays, they still charge foreign exchange fees even though their hotels are located in other countries, there is no annual rebate, there is no annual free night certificate, etc.

AMEX and SPG really seem to be banking on the fact that spending money on the SPG card is really the only “easy way” to earn SPG points without hotel stays. Those are really your only 2 options, hence why SPG points are so highly valued. So if you want to spend your way to SPG points, then you need to pay AMEX $65 a year for the privilege.

When I called AMEX to close the card, they offered me a partial statement credit of $35, which covered a little over half of the annual fee.

I don’t stay at Starwood enough or spend enough money on the card to justify even paying the reduced $30 annual fee. Again, not everyone will agree with me here but this is just my personal situation. If I stayed at SPG even once a year, I’d probably then pay the $30.

Since this card is a Credit Card, you are allowed to downgrade it to a free version of another AMEX Credit Card, so I ended up chosing the Blue Cash Everyday card. Now this was a few months ago before the new AMEX Everyday Card existed (which earns Membership Rewards without an annual fee). I’d recommend downgrading to that new card because it will keep your Membership Rewards points alive in the event you close a AMEX PRG or AMEX Platinum card.

I have no plans on ever using the Blue Cash card, but I figure it is good just to keep the credit line open.

Chase Sapphire Preferred

Status: Downgrade to Chase Freedom or Chase Sapphire

Retention Offer: No

Annual Fee: $95

If there weren’t so many cards always offering bonuses, then this is the only card I would actually pay the $95 annual fee for.

I have had both the Mastercard and Visa version of this card and outside of looking cool, the Ultimate Rewards program and 2x on travel and dining is pretty awesome.

If you straight up close this card and don’t have any non-Ultimate Rewards cards, then you will loose all your UR points.

So it is best to simply downgrade to either a Chase Freedom (which is actually awesome thanks to the 5x rotating categories) or Chase Sapphire (no annual fee, less benefits).

Both of these cards allow you to still earn Ultimate Rewards, just without the ability to transfer at 1:1 to airlines and hotels. However if you get a Chase Sapphire Preferred or Chase INK Bold or Plus in the future, then those Ultimate Rewards points once again have that ability to transfer.

Chase Hyatt Visa

The Hyatt card was another card that I solely got for the 2 free nights and then never used.

Even when I called, the retention specialist was like, “I see you spent $1,000 last year in the first month and then haven’t really been using it.”

Closing this card was actually a tough decision because on your card member anniversary every year, you get a 1 free night certificate at a category 1-4 property. Now depending on where you use this, it is obviously worth more than $75.

However, they know most people aren’t just going to spend 1 night somewhere and then hotel hop, so they are hoping you redeem this free night and then pay out-of-pocket for the rest of the nights at Hyatt.

I of course would be fine with hotel hopping (don’t know about my girlfriend…) but with Ultimate Rewards points so easy to come by, a category 4 hotel only costs 15,000 points, so in my humble opinion it is better just to do that than pay $75 for the certificate.

Of course if you are Ultimate Rewards poor or stay at Hyatts anyways, then keeping the Hyatt card open and getting the 5,000 bonus points and free hotel certificate might be a great deal for you. It all just depends on your personal situation.

Since this is a branded Chase Card, you can’t downgrade to a free version.

Citi American Airlines AMEX & Visa

Status: Open

Retention Offer: $95 statement credit

Annual Fee: $85

This is weird one because I have 3 AA cards from Citibank. 2 personal and 1 business.

In November 2013, 2 of the cards “came due”. While the annual fee isn’t as high compared to AMEX, together the 2 cards totaled $170.

These AA cards are actually pretty good since they give you a 10% rebate on AA award flights but you only need 1 card open to get that bonus, not 3…

So I called in November 2013 to close both my AA personal cards and to my surprise, I was offered a $95 statement credit for each card, which I obviously took.

Now the annual fee is only $85, so I’m not sure why they are giving out $95 but I will take it.

From anecdotal evidence, it seems this is a pretty standard offer if you call to close, so I suggest doing it.

Recap

All in all, calling to say “I am thinking about closing this card” is the best thing you can do!

However many times with these retention offers, the points will only post 6-8 weeks after you complete the retention requirements.

So remember to call early enough like 8 months into your card membership (4 months before the annual fee is due). This will still get the same retention offers but the bonuses will post way before your annual fee is actually due. Who knows you might even get another offer when you call to close for real.

Thanks to my retention offers, I was able to get $190 in statement credit and 15,000 Membership Rewards for spending 30 minutes on the phone.

Of the 7 cards I had called to close, the retention offers and downgrading allowed me to only close 3 of my cards which is pretty awesome!

Great point and I would have done that but the Platinum, PRG, Gold, and Green are all Charge Cards and unfortunately you can’t downgrade from Charge to Everyday Credit Card. I really wish they would let you!

I don’t know because they gave me the statement credit. Honestly I am not sure if that card can be downgraded because typically “branded” cards like AA, United, Hyatt are not eligible (at least with Chase, not sure about Citi).

– By keeping a lot of credit open you increase the need to call the card issuer to get your approval. In almost every circumstance I have to call and move credit around or cancel older cards to get approved, while with my wife I don’t do that and just SM to cancel and she gets approved for about as many cards as I do without all the hassle.

– There is some anecdotal data suggesting that Barclay in particular will be more likely to give you a new card if you don’t already have too much credit with them. People have in fact been calling to REDUCE their credit lines on existing cards (typically to around $6,000 each) before making new applications to improve their chances according to posts on FT.

Also, what’s the difference between the obvious two scenarios:

1) You apply for a new card and to get it you transfer credit from an older card, closing it.
2) You cancel an older card then apply for a new card?

Not asking wrt my chances of getting approved, rather the long term story it tells for my relationship with that issuer…

In my opinion, the credit hit isn’t worth it just for 10k points especially when you can open a CSP, get 40k UR, and then after 1 year simply downgrade to Chase Freedom and keep that line of credit open for basically ever. If the bonus was 20k+, I’d think about it but again everybody’s situation is different.

When you call 8 months in thinking about canceling and they don’t give you an attractive offer do you say don’t cancel yet let me drain the points first? Or will that look like you’re just fishing for a good retention bonus and prevent them from truly offering you a good deal?

Thanks to your advise we downgraded two United Explorer Cards, wife and I, for savings of $190.00. Only bonus offered ,which were individually declined, were United Airlines Club Passes! Still, I didn’t bother to escalate to supervisor, which in all likelihood is Call Center Cubicle-mate, as it exceeded my daily level of displeasure!